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10 Biggest Obstacles to Financial Freedom in Your 20s

If you snagged  a copy of my first book then you are well aware of the fact that I had a very detailed system when it came to my finances. I have a savings plan, automated finances, and I went into excruciating detail of how I split stuff up and made my money work for me.

Unfortunately, I talk to a lot of millennials who are still falling into financial traps that are easily avoidable. Here are the 10 ways you are stopping yourself from financial freedom in your 20s.

 1. Credit Card Debt

This is the real kicker, isn’t it? How many of you have spent your way into oblivion? Given the statistics concerning credit card debt in America probably quite a few of you. In fact, the average college graduate walks into the real world with about 20k in debt. Furthermore, the average credit card debt for 25 to 34-year-olds has increased 40% between 1989 and 2004. Credit card debt has also been inching up since the economy started improving.

Seriously guys, what the hell are we doing to ourselves here? Using a credit card is one of the most expensive ways to borrow money. Sure, if you use them responsibly they can be a great asset, but clearly, we’re doing something wrong here.

2. Not having a budget.

No one likes the word budget. The word itself seems tedious, boring, and even really scary for some. Unfortunately, there’s really no way around having to create one so you’re just going to have to tackle the monster head on – unless, of course, you’d just rather live in ignorance about your finances.

When working with Money Mindset coaching clients, I usually have them start off with a free tool like Mint or Personal Capital. These free online tools can help you create budgets while making sure you stay on top of your bills, your net worth and your debt repayment.

Pick your fancy:

Click here to read more about my favorite resource for Mint.com.

Click here to read my in-depth review of Personal Capital.

3. Not contributing to a 401k or IRA.

If your employer is matching any part of your 401k contribution you’d better sign up ASAP, otherwise you’re just giving up free money. If your employer doesn’t offer a 401k I’d suggest opening up an IRA. All you need is $100 a month and you’ll be well on your way to saving for retirement.

If you’re self-employed like me or you just want to invest outside of your company plan, I highly recommend checking out Betterment. This is what I use to invest in Vanguard index funds and I can invest whatever extra money I have. Click here to read my full review of Betterment.

4. Using debt to pay off another debt.

This is possibly one of the stupidest things I’ve heard people do with their money besides burning it. For the love of all things good and holy do not use a credit card to pay off another card. Or your student loan to pay off your car loan. Or a personal loan to pay off a business loan. It doesn’t solve anything – you still owe the money!

If you’re really in a bind with your debt you can consider consolidating or refinancing.

5. Not even bothering to invest.

Since we came of age during The Great Recession, I can’t totally blame Gen Y for being scared of investing. What I can blame you for is not doing your research anyway.

The American economy is proven to be pretty damn resilient and you’re young enough to ride out the craziness we’re experiencing. Besides, it’s easier than ever to invest wisely thanks to robo-advisors like Betterment or micro-investing apps like Acorns.

6. Not developing a side hustle.

I may be a bit biased here because I made extra money as a freelance writer on the side of a day job for years, but it’s with good reason that I’m constantly telling you guys to start your own businesses.

It’s liberating, puts you in the driver’s seat, and it’s good to know that you have a way of making extra money in case your day job doesn’t pan out. If you need some help deciding what kind of a business you should start checking out these side businesses you can start on your own.

7. Not knowing the difference between what you need and what you want.

I still suffer from this all the time. We grew up in an age of consumerism so we like shiny things. A new iPad is coming out? Let’s buy it for way more money than it’s actually worth. There’s a new Android phone? Let me buy a new one NOW instead of waiting until I get my upgrade.

We really need to stop doing this. The next time you feel an urge to buy something expensive and shiny step back, take a few breaths, and come back to grips with reality – you don’t actually need it.

(Although I do love my Mac 😉 I just won’t buy one every time they upgrade it. )

8. Buying a brand new car.

Why on earth would you buy something brand new that will undoubtedly depreciate in value over time? Better yet why would you take out a loan for something that will depreciate in value?

A car is not property, which always has the possibility of bouncing back. It’s not a student loan which in theory is supposed to get you a better paying job.

It is not an investment – or well, it’s a horrible investment. In case you didn’t know, your wheels lose value as soon as you drive them off the lot. Save up your money to buy a car. Or buy used. Or, do what I do – take the bus and walk (Seriously, public transit saves you a ton of money and forces you to exercise. Win!).

9. Sticking to a big bank.

Another good thing to come of out of the stolen wallet fiasco is that my big bank. Instead, I switched to an online-only bank which is a low-cost operator – meaning no crazy ass fees for stupid crap. They also have high yield savings accounts that provide much better bang for your buck.

10. Not having an emergency fund. (Or any savings, period.)

An emergency fund is paramount! It’s how you can handle those surprise necessary expenses like visiting the doctor or the car breaking down. It’s also good to have in case you get laid off so you can at least live off of something while you find a job (you’ll wish you’d started a side business by then).

If you think you can’t save take a look around and you’ll notice you spend a lot of money on unnecessary things. You don’t need a $4.00 coffee every single day. You don’t need to eat out so much. You don’t need to buy that many drinks at the bar. Those three alone could save you a nice chunk of cash.

Alternatively, you could also try cutting ruthlessly on things that don’t matter to you so you have more money for things you do care about. For example, I don’t really value a car so I save money on a loan, insurance, tags, and gas. Because I don’t spend a lot of money in these areas (because I quite frankly don’t care that much), I then have more money to put toward things that do matter to me like travel.

This usually works better than trying to cut all unnecessary costs because getting clear on what you want makes money management much easier. This is a topic I’ve discussed extensively with podcast guests including Jason Vitug, Lauren Greutman, and Dani Pascarella.

Conclusion:

All of the aforementioned obstacles have solutions so you can conquer them. Granted, it may not be easy but you have to stare at your financial situation square in the face. The earlier you cultivate healthy financial habits the longer they’ll stick and the faster you’ll see relief.

 

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Is It Time To Incorporate Your Business?

This is a sponsored conversation written by me on behalf of CT Corporation. The opinions and text are all mine.

incorporate your business

Lately, many members of the Make Money Your Honey community have been asking me about how to file for an LLC. Heck, even people in my personal life are asking me this question.

First, let me point out that I am neither an attorney or an accountant, so everything I’m about to say is based on my own personal experience. I do recommend seeking guidance from licensed professionals should you have any questions.

Second, although I’ve had an LLC for my business since 2013, I made some mistakes that cost me money. These are mistakes I’d like for you to avoid. I’ll share them throughout this piece so you don’t lose money like I did.

Why do you need to incorporate your business?

There are two main reasons why people incorporate their business:

  • Taxes
  • Legal protection

Taxes depend on which incorporation you choose (ex. LLC versus S-Corp). If you’re looking at an LLC, you’re considered a pass-through entity. In other words, you’re like a sole-proprietor tax-wise, but you have a legal separation between yourself and your business. There are also some other differences between an LLC and an S-Corp that makes them different come tax time, but that’s a discussion for another time.

Now let’s discuss legal. This is critical when it comes to getting your ducks in a row. Let’s say your business runs into some legal issues. If there’s no real legal separation between you and your business, they can go after everything you’ve got.

As another benefit, it also makes things easier for your finances. You have to separate your business and personal expenses anyway, and you will be asked for specific documents when you go open your business checking account.

When do you need to incorporate your business?

I started making money as a freelancer since 2010 but didn’t incorporate until three years later. That’s also how long it took me to separate my business and personal finances.

Honestly, I probably waited too long. This was partially due to the fact that there was a part of me that never thought I’d be fully self-employed someday. I saw my freelancing income as “extra money” for years. But even if that was the case, I still needed the legal protection. Going that long without it was probably not a good idea.

Furthermore, something happened internally when I finally incorporated. There was something about seeing my business’ Articles of Operation that made me think, “Oh, this is real now. I have to take this seriously.”

How much does it cost to incorporate your business?

Oh man, here are where my mistakes come into play. I didn’t really do my due diligence when I was forming my LLC and went with the first service I could find. I fell for the “Filing starting at $X” marketing and didn’t realize the process would be far more expensive. I was also automatically enrolled in an additional service which I completely forgot about (of course) and then saw the surprise on my credit card bill a year later.

Paying for an LLC isn’t the problem. I will pay good money to properly protect myself – especially when it comes to legal stuff. What annoyed me was the lack of transparency.

As for how much it costs to incorporate, that depends on what you are looking for. CT Corporation has their prices listed on their website.

Additionally, you get the peace of mind knowing that CT Corporation has 125 years of experience with legal compliance. That is not an assurance I had when I filed for my own LLC many years ago. And to be honest, it is something I freaked out about, but at the time I didn’t have a support system to talk to about these things.

What if I need to convert my business to another structure later?

This is an excellent question. Businesses change over time, so you need the flexibility to change your incorporation if need be.

I’m actually dealing with this now. About a year ago, my accountant and I started discussing converting my business from an LLC to and S-Corp because of taxes. My business was starting to expand to a point where that move would make sense. Given that my business is growing in revenue (and profit) rapidly, I might have to make this move by the end of the year.

CT Corporation is available to help me make the S-Corporation election. With their help and help from my accountant, I can make the process as easy as possible.

Do I need a business license too?

That depends on a variety of factors including what your business does, where you do business and where you live. CT Corporation can help you figure that out

Final Thoughts

Incorporating your business is an important part of running and establishing your business for the long haul. It helps you start getting organized with the finances, legally protects you and helps you start taking your business more seriously.

Have you incorporated your business yet? Is it something you’re planning on doing? Let me know by tweeting me!

Comments submitted may be displayed on other websites owned by the sponsoring brand.

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6 Lessons Learned in Mexico About Running a Location Independent Business

location independent business in mexcio
Ruins at Palenque. View from the top of Plaza de las Cruzes.

Hello from Mexico!

If you follow me on Instagram you know that I just spent a few days in Mexico hanging out with other digital entrepreneurs. It was a spontaneous impromptu trip I booked simply because I felt the urge to get on a plane and explore a new place.

For many people, being able to run a location independent business they can work on from anywhere in the world is a dream come true. Admittedly, it was one of the major reasons I wanted to freelance and work for myself. I didn’t want to be tied to a job where I had to log a certain amount of hours and ask for permission to get on a plane if I felt like it.

Despite the fact that this is how I felt, I have to admit I wasn’t really taking advantage of it. My first year of self-employment I went to about eight different cities all within the U.S. During my second year of self-employment I only went to Charlotte.

By December 2015 I was itching to get on a plane. I realized it wasn’t a matter of making more money because I can just make money from anywhere. It also wasn’t an issue of lack of time because I make my own schedule. It was simply me getting in my own way because I was afraid I wouldn’t be able to handle having a location independent business.

As soon as I realized this, I booked a roundtrip ticket to Mexico using Southwest points and called up my web designer to see if I could crash with her in Chiapas. She said yes and I’m sitting in her dining room as I write this.

Since this was the first time I attempted to run a location independent business while traveling internationally, I figured it would be great to share some of my insights with you guys.

I know some of you have some major wanderlust. I also know some of you feel like you simply can’t design your life and finances in a way that would allow you to travel and work at the same time. I’m here to clear the air. I plan on covering this topic extensively as I begin to travel more, but for now, here’s a good place to start.

Lesson #1: Our idea of a vacation is ass backwards.

Before heading to Chiapas I had a couple of days in Cancun. I then took a regional flight to meet Rachael (my web designer and friend) in her town of San Cristobal De Las Casas. During my stay in Cancun I realized that most of the people there were a) American and b) spent all their time in the hotel and didn’t get a feel for what Mexico really is. In fact, I was the only American on my regional flight to Chiapas.

I don’t know about the rest of the world, but I do know that many Americans tend to think vacations look a certain way. They need to look like exclusive hotels. They need to look like not working at all. They need to look like having everything planned out.

Like most things, this just isn’t how life works. We end up not really experiencing anything that way and spending way more money than we need to (all-inclusive are not cheap).

Another interesting aspect of having the idea of vacation ass backward is needing to wait until you have a certain amount of time of vacation hours. Since I have a location independent business I can run from my laptop, I can take a trip whenever I want. My web designer and her husband had been traveling extensively for the last couple of months and their web developer, who also stayed with them while I was there, spent six months traveling the world last year.

I know that for many it’s not really a choice. They can’t pack up and get on a plane because their jobs don’t allow them too. I get that. But there’s still something to be said for actually using your vacation time. Americans are taking the fewest vacation days in four decades, according to a study called Project: Time Off. They are forfeiting billions of dollars in paid vacation days.

Additionally, if you want to eventually have a location independent business, you may need to start hustling your ass off and build a career that allows for flexibility.

All of this is to say three things:

  1. Traveling doesn’t need to look like swanky hotels and doing nothing for a set period of time. You can definitely work while on the road and it’s worth it to explore a little more.
  2. If you can’t just pack up and get on a plane on a whim, at the very least take your damn vacation time and stop working for your employer for free.
  3. If you want a location independent lifestyle, create a career that allows it.

Lesson #2: Traveling doesn’t need to be expensive in order for it to be enjoyable.

One of the main objections I hear about traveling is that it’s expensive. More specifically, that sometimes it needs to be expensive in order for it to be enjoyable. This is a false assumption.

Flights can be free or low cost with credit card points. You can travel for fairly cheap and get some good deals so long as your dates are flexible.

You can also go to beautiful countries that aren’t expensive. I’m astonished by how little money I spent in Mexico. Granted, I spent little money because I didn’t stay in a tourist area. I went to a totally different part of the country to get a feeling for Mexico and was using Mexican pesos. I took a tour to Agua Azul, Misol Ha and the Mayan Ruins in Palenque for a total of about $25 USD. Some of my meals were literally costing about $5 USD and of course, I was staying with friends so there went the hotel expense.

location independent business Agua Azul in Chiapas, MX
Agua Azul in Chiapas, MX
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Misol Ha in Chiapas, MX
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Temple of the Skull. Mayan ruins at Palenque.
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Going into the canyon in Chiapas, MX. Absolutely breathtaking.

The most expensive thing I had during this trip was my hotel stays in Cancun in between flights within Mexico and going back home. For those, I simply saved up money and tried to get as many days away from tourist areas as possible

The point is that traveling doesn’t need to cost an arm and a leg, therefore money isn’t a valid excuse.

Lesson #3: “I wish I hadn’t traveled so much in my life,” said no one ever.

I’m big on values based spending. This means I make sure to spend money on things I care about and cut drastically everywhere else.

Because I want to travel I have a savings account specifically for travel related costs. While I go out of my way to make things less expensive, I still have to spend money sometimes to make things happen. In 2016, I’ll probably end up spending a few thousand with all the trips I have planned, with Bali being the most expensive because it’s part of a retreat.

This just means I work out my budget so that I prioritize this. I keep track of these goals by using tools like the Capital One 360 goal setting feature and Mint.com. I highly recommend The Mint Manual (affiliate link) which is a book that teaches you how to use Mint like a boss.

This is where it’s important to remember that I would much rather spend money on experiences than things. Stuff is cool, but it loses it’s luster. On the other hand, I’ll always remember the nights laughing with friends in Mexico and doing a headstand atop a Mayan ruin. I will always remember the insane view of Palenque and the sheer majesty of the river canyon in Chiapas.

san cristobal location independent business
Night out with friends (AKA the RKA Ink crew) in San Cristobal.

 

location independent business yoga palenque
Yoga teacher Stewart Snyder helping me get into headstand on top of Plaza de las Cruzes at the ruins in Palenque.

Besides, no one has ever said “Damn, I really wish I hadn’t spent so much time and money traveling.

Lesson #4: A location independent business expands horizons.

I met my web designer online a few years ago when she first rebranded my site just before I quit my job. Fast forward to 2016 and I’m staying at her house in the middle of Mexico.

I’ve met so many people through my online work that I literally have friends everywhere in the world. This would not have been possible without the internet.

Lesson #5: There are challenges to a location independent business, but it’s not as hard as you would think.

I worked a little on this trip. It’s not because I have to since I can just stop taking clients, it’s because I can work from anywhere and had some important deadlines. This means I was working at airports and on airplanes (not like you’re going anywhere anyway). Because I was staying with a couple other digital nomads we had a co-working day while in Mexico and would sometimes work in the mornings. I also got some stuff done at the hotel in Cancun before enjoying the pool.

Granted, I also have some systems in place so I can explore. Since I knew I’d be having some adventures I also got some work done ahead of time. I have contractors who know what they need to do while I’m gone. I have people I can delegate to. So on a Monday when I’m taking a boat tour of the canyons in Chiapas I know things are getting handled.

Getting work done while waiting for a flight. Yes, we really do this.
Getting work done while waiting for a flight. Yes, we really do this.

Lesson #6: Just fucking do it.

When my new friend Stu (web developer and yoga teacher) and I were at the waterfalls at Misol Ha he stopped for a second and said “I just realized something. I’ve been hellbent on creating passive income so I can do what I want, but I’m looking at a gorgeous waterfall in the middle of Mexico right now. I’m already doing whatever I want.”

This is an important realization. We choose to live our lives the way we want, but often times we’re too busy waiting for external circumstances to change. We get so much into our own heads that we literally stop ourselves from living. We forget we have choices.

waterfall misol ha location independent business
Underneath the waterfall at Misol Ha.

Final Thoughts

Mexico is a magical country and I’m so happy I decided to take this trip despite my fears of running a business while I’m traveling to another country. I look forward to doing more of this as the years go on. At the end of the day, I’ve built my life in a way that I can do this so it’s up to me to take advantage of it.

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FinCon Recap: I Roll With the Coolest People In Finance

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“I almost cried when I saw how people get excited over spreadsheets here! It’s like I found my people!” said my new friend and fellow Miami native Ani Mercedes.

“Yeah, we get that reaction a lot,” I replied.

FinCon is the one event I look forward to most each year. It is probably the only financial conference where people bust out their phones to start a Periscope broadcast as they throw back a few (okay, way more than a few) adult beverages and talk about stock market swings, early retirement and Google Analytics.

As someone recently described it on LinkedIn, FinCon is like crack for creative people in finance.

Better yet, when I told a waitress I was in Charlotte for The Financial Blogger Conference she looked at me and said, “Bullshit! You’re way too cool to work in finance!”

Well, as the awesome tote bag I got at the Fidelity Women’s event said “Frugal Is The New Cool.”

But seriously, this conference is not just full of cool people, but the coolest people in finance. From people who retired at 30 thanks to investments to people who’ve converted a school bus into a mobile financial education classroom.

Like the waitress, you would think people in finance are a drag, but this event has brought together hundreds of people who are changing the game for good. Here are just a few of the reasons I think FinCon has some of the coolest people in finance.

We understand that money is just a means to an end.

While at the pre-party someone mentioned to my friend Michelle Jackson and I that they couldn’t find any investment bloggers. Michelle and I looked at eachother quizically since we happen to know there are a ton of bloggers who talk about investing.

“Did you try looking for financial independence or early retirement?” Michelle asked. “Those guys are all over investments.”

This is an example of how the FinCon community understands money a little differently than how most people would. Rather than seeing money as the end goal, the FinCon community understands that money just allows them to do stuff they want in life. They are conscious of their goals and make financial decisions accordingly.

We’re willing to have tough conversations.

One thing I appreciate about FinCon is the willingness to discuss difficult conversations such as women, minorities and education. Most people wouldn’t touch these topics with a 10 foot pole (Hell, I’m a woman and a minority in this country and this stuff even makes me uncomfortable!), but in the FinCon community we’ve got people asking “Okay, how can we properly address these important issues?”

Granted, these are difficult and complex issues with multiple layers and a lot of emotion, but the fact that the FinCon community is even willing to go there says a lot about the caliber of people who attend this event.

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Fidelity’s Women and Money Tea Event

For example, Fidelity had an event for women in finance. We had women from all walks of life and they did an amazing job at creating an intimate atmostphere where the women could open up and share their thoughts. From talking about our upbringings to how financials affect divorce, the entire event was a beautiful moment where we could just be there for each other.

Another example is when I found my apparent sister from another mister Zina Kumok. We connected on the basis that we both come from immigrant families who fled communism. Other than different countries and different religions, we practically had the exact same upbringing because our families experienced the same kind of oppression. J.D. Roth (of Get Rich Slowly fame) heard us talking about this and said, “Holy crap I need to get the two of you on a podcast!”

Our version of hard work is probably different than yours.

Everyone who attends this conference is a hustler. I did six media interviews, had seven meetings and attended eight events while I was at this conference. The way I see it I need to make a return on my investment (and I always do).

However, while I was working hard I was also having an absolute blast. I got to hang out with some of closest online friends like Carrie Smith and Shannyn Allan, make new friends like Debt Free Guys, explore a new city, dance my ass off and have several laughs.

(Debt Free Guys, if you guys are reading this I was totally serious when I asked you to be my gay best friends ;))

I think work-life balance is a load of horse shit, so I try to focus on a work-life blend instead. As such, FinCon is like a work-cation. I was hustling my ass off, but I was also having a really good time.

Paula Pant of Afford Anything once wrote a blog post about how she was working at a cafe in Paris and an American tourist practically pitied her for working on vacation. What the American tourist didn’t understand is Paula’s work is so flexible she can pack up her stuff and go to another country the next day if she wanted to. The American tourist had to work enough to accumulate the required vacation hours and then get their time off approved only to go back to work in two weeks. In other words, they totally missed the point.

Another killer example of this is Tiffany Aliche of The Budgetnista. Her hustle is serious and I have immense respect for it, but because she is on a mission to educate people about finance she doesn’t necessarily see it as the “hard work” we’re accustomed to hearing about. It’s clearly a vocation, not a struggle.

Through our version of hard work, the FinCon community reaches over 1 billion readers. Yes, that’s 1 billion with a b. We wouldn’t be able to do this if we didn’t make sure to have fun along the way.

This is the part where I have to end the blog because I’m pretty sure I’m experiencing symptoms of separation anxiety. To my fellow FinCon friends reading this, I cannot wait to see you in San Diego next year! I already bought my ticket and reserved my hotel room for 2016.

For those of you who have thought about going, as Nike says JUST DO IT! 

Click here to learn more about FinCon and meet us in San Diego in 2016!

 

 

 

 

 

 

 

 

 

 

 

 

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